State Issues - Beginning Farmer Tax Credit Program

IssueFor every four farmers in Pennsylvania that are age 65 or older, there is only one farmer under the age of 35. Of the 7.7 million acres of farmland across Pennsylvania, 41 percent is managed by a farmer 55 years or older. An estimated 11 percent of that land is expected to change hands over the next five years. Those statistics highlight the challenges that our next generation of farmers face when wanting to start a farm of their own. This situation is not unique to Pennsylvania as agriculture nationwide is faced with an aging workforce. But, there is a new generation of Pennsylvania farmers who want to carry on this state’s agriculture legacy—whether they are taking over farms started by their families, or first-generation entrepreneurs. Pennsylvania, with its fertile soil, excellent growing climate and proximity to major markets is an excellent location to start a farm. Pennsylvania Farm Bureau is asking for your support of Senate Bill 478 introduced by Senator Elder Vogel that will create a beginning farmer tax credit program to help new farmers with the very real challenge of finding farmland.

Background According to data collected by the U.S. Department of Agriculture, a significant amount of farmland in Pennsylvania will change hands in the next five years. Half of those farm land owners expected to sell their land to a non-relative or family member. That change in land ownership presents a unique opportunity for the next generation of farmers who are seeking to start a business of their own. But as any young farmer can attest to, access to farmland is one of their greatest struggles.

The beginning farmer tax credit seeks to help those young farmers become competitive in either renting or purchasing farmland. This legislative effort would create a personal income tax exemption for farm owners who rent or sell their land and facilities to qualified beginning farmers. Landowners could receive a one-time personal income tax credit for the sale of farmland, or three years of personal income tax credits for the lease of land or facilities to young farmers. In both cases, the credit provides a tangible incentive for landowners to work with beginning farmers, many of whom struggle with the capital needed to make competitive offers on the lease or sale of land. Landowners can qualify for the credit in the sale or lease of land to family members and non-family members.

This legislation will include several important safeguards to ensure these tax credits are being used by the intended target audience. Any sale of land that qualifies for the tax credit must be for fair market value. Leases that qualify for the tax credit must be enforceable through a signed written agreement. There are also provisions that prevent spouses and business partners from qualifying for the tax credit.

This legislation will help with the very real struggle that family farms face when trying to pass the farm from one generation to the next. Equally as important, it will provide an incentive for landowners to work with a new generation of entrepreneurial young famers who want to start a farm business of their own. This program is based on a successful tax credit program in Minnesota. In the first year of the Minnesota program, the state offered $2.3 million in tax credits to nearly 450 landowners.

Pennsylvania isn’t unique in the challenges faced by beginning farmers. But the Keystone State could become a leader in the Northeast by offering a tax credit program directly related to the struggle that young farmers face in finding land. No other surrounding state offers such a tax credit. This is one way that state government can show the agriculture community that Pennsylvania is open for business.

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